Month: November 2012

Planning In Advance For Incapacity

Nobody likes to think about becoming incapacitated but it is something that everyone must deal with, as they age. This is simply a part of estate planning to give you peace of mind by knowing that you have done everything possible to aid and protect your family. By planning about incapacity in advance, an individual can remove the burden of having your family make difficult decisions for you when the time comes.

In order to avoid the costly legal proceeding to declare you incompetent to handle your financial affairs, you need to establish a plan and designate someone you trust to have the authority to do this for you. This durable power of attorney can be general or limited. A general durable power of attorney allows your agent, or attorney-in-fact, to conduct every act that you could legally do. A limited durable power of attorney covers a specific act, such as the sale of property. Usually the agent or attorney-in-fact is a family member, but it can be anyone you trust to handle your affairs, such as withdrawing money, paying bills or managing investment accounts.

Having a will is no help for incapacitation, since it does not take effect until an individual dies, and it is widely recognized that less than 50% of individuals even have this basic succession planning tool when they die.

In addition to establishing a plan for someone to handle your financial affairs, you should plan for your health care. Wisconsin recognizes two types of advance directives. One is a health care power of attorney and the other is a living will. The health care power of attorney allows you to appoint a family member, or some other person that you trust, to make decisions for you regarding your medical care. This person will then be authorized to make decisions about your medical treatment, if you become unable to make an informed decision for yourself.

The other type of advance directive is a living will or a directive to physicians. This is a written instruction made while mentally competent to state what type of care you receive if you become incapacitated. Under Wisconsin law, an individual is incapacitated if they do not have the ability to receive and evaluate information effectively or to communicate decisions to such an extent that they are unable to manage their health care decisions.

A living will describes the nature of life sustaining care that you desire, if your condition is terminal or permanently unconscious and there is no hope for recovery.

What Is Probate And Why Should You Want To Avoid It?

How many times have you overheard a discussion or read an article talking about avoiding probate. Then later, wondering what it involved and why should you want to avoid it?

Probate is the legal process which divides and distributes a person’s assets after his or her death. The probate court will inventory the estate and distribute it to the heirs or beneficiaries of the deceased, after all debts are paid. A will must go through probate to be given effect. The term “probate” is derived from the Latin words “having been proved”. Through the legal process, the will is proved, or authenticated, the heirs are identified and the estate is distributed according to the will, after all taxes and debts are paid.

If there is no will, the assets of the deceased will be distributed according to the state’s laws of intestacy.

In Wisconsin, if an individual dies and has at least $50,000 in assets that do not automatically transfer to someone else, probate is necessary. This could include bank accounts, investments, vehicles, real property and personal property.

So why would you want to avoid the probate process? Because the probate process can be lengthy, from a few months to over a year or more, depending on how complicated the estate is. The average probate case in Wisconsin is open for 12 months. Having a long drawn out probate battle can be expensive and result in substantial legal fees.

Another primary reason to avoid the probate process is to avoid delay in the distribution of the assets of the estate, which are tied up during probate.

Also, if the will provides for trusts for children or grandchildren, that will require continued oversight by the probate court, an annual accounting and additional attorney fees.

In order to avoid the probate process, individuals in Wisconsin can establish a living or revocable trust, which will in effect own the assets of the estate. The living trust is one of the most popular vehicles for avoiding probate. It gives the individual who has a living trust the power to make alterations as desired, including complete revocation. Following this individual’s death, the named beneficiaries of the trust will then be distributed the assets of the estate, without having to go through probate.

Boomers Value Family Stories Over Inheritance

According to a survey conducted by the Allianz Life Insurance Company of North America, baby boomers prefer to have family stories and life lessons over an inheritance. The survey was conducted among boomers aged 47 to 66 and their elders over the age of 72, regarding their feelings about inheritance. Members of both groups felt that an inheritance was not something owed to a child. For boomers, 86% of them felt that family stories are the most important part of their legacy. For those over 72 years of age, 74% agreed. There was a similar finding, 64% of boomers and 58% of elders, ranking family stories ahead of personal possessions.

Katie Libbe, Vice President of Consumer Insights for Allianz, said that “people are more interested in the stories and family values of their ancestors.” She went on to say that people value knowing “where they came from” and what struggles their parents have gone through. Ironically, this seemingly less materialistic generation of baby boomers is in line for a huge transfer of wealth, notwithstanding the housing market debacle and the recession.

A MetLife study commissioned in 2010 revealed that $64,000 was the median inheritance for two out of three boomers. It further concluded that there will be an intergenerational transfer of wealth totaling $11.6 trillion, including over $2 trillion that has already been gifted.

Krause Law Offices LLC can help you have personal histories written by professionals as part of your estate planning. Surprisingly affordable, these books of your life can be the most treasured thing you pass on.

If you would like to gather your history, we have some tips. In order to satisfy the boomers’ desire for stories, history and photos documenting family traditions, there are several ways to accomplish this:

• Sit down with your parents or grandparents and record conversations about their childhood, their own parents, growing up, schooling, getting married, raising children and their careers.

• Try and get your parents to label all of the photographs stored in boxes or drawers and give approximate dates for the events.

• Use the internet to research the family history, or have some family member provide information to create a family tree showing marriages, births and deaths.

• Preserve any handwritten letters from your parents or grandparents. These will become more and more special as handwritten letters become extinct.

• Discuss the whereabouts of wills and other important documents, in addition to health care directives and other life ending decisions.

The Allianz study showed that elders are considerably more prepared with their estate planning needs than their children. Some 79% have completed their estate planning or have talked to their children about their wishes. Unfortunately, only around 50% of all boomers have considered estate planning or discussed inheritance issues with their children.

Explore Your Estate Options Before January 1, 2013

As we ring in the year 2013, millions of individuals will face as much as a 20% increase in estate taxes. In 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (“TRUIRJCA” or “TRA 2010” for short). The provisions of this law were temporary, and will end as we begin the new year. The sunset of TRUIRJCA is particularly noteworthy for estate planning, since the the estate tax exemption as well as the lifetime gift tax exemption will both be reduced from $5.12 million back to $1 million, and the generation-skipping transfer tax exemption will be reduced from $5.12 million to approximately $1.4 million. The maximum tax rate will likely jump to 55% by the end of 2013.

Although there was little discussion of this during the recent presidential debates, the significance of it deserves attention and immediate action before year end. It is important to entertain what options are available to protect your assets from the increase of up to 20% more in estate taxes, due to the fact that everything over $1 million will be taxed at the highest rate.

If succession planning strategies have not been on your radar screen, you are not alone. Most people tend to procrastinate about such things. However, if you want to explore your options available with estate or succession planning and seek cost effective measures to save money before the end of 2012, you must act now.

Perhaps you might think that this applies to people with considerable assets and not to members of the middle class. Unfortunately, this is not the case. On January 1, 2013, when TRUIRJCA comes up for renewal, President Obama has clearly indicated that he will not renew the law. Therefore, members of the middle class, as well as high net worth individuals, will face major changes ahead in 2013.

Time is of the essence and putting together a game plan now can help you to be assured when TRUIRJCA expires. Congress has the authority to renew TRUIRJCA but there is no guarantee that it would do so.

The gift exemption is likely to get worse before it gets better in 2013. It is important to explore your options and establish a plan to legally reduce what taxes are owed and to protect your hard earned money. Act now to structure and protect your assets.

Estate planning serves to protect your assets so that they are transferred from one generation to another, charities, non-profit organizations, churches or some other individuals. The estate planning process also serves to assist clients in legally avoiding paying estate taxes. Some ways to accomplish this is through wills, trusts, limited liability companies, family limited partnerships, powers of attorney and deeds.

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